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Informist, Thursday, Jan. 16, 2025

--Axis Bank: Will wait for final LCR norms to comment on impact 
--Axis Bank on RBI draft LCR norms: Have made representation to RBI on it 
--Axis Bank on RBI draft LCR norms: Have done internal assessment on impact 
--Axis Bank: Drop in Oct-Dec margin because of maintaining higher LCR

NEW DELHI – Axis Bank has been assessing the impact of the Reserve Bank of India's draft liquidity coverage ratio norms, the bank's management told the media Thursday after the release of the bank's Oct-Dec financial results. Axis Bank has also made a representation to the central bank on the draft norms, the management said.

The private-sector bank reported a mere 3.8% on-year increase in net profit for the December quarter, with weak growth in interest income and doubling of provisions weighing on its bottom line. Axis Bank's net profit for Oct-Dec was INR 63.04 billion, against analysts' estimate of INR 64.43 billion. Shares of the lender ended the day at INR 1,038.00 on the National Stock Exchange, 1.1% higher from Wednesday's close. The bank released its results after the stock markets closed.

On Jul. 25, the RBI had released its draft guidelines on the liquidity coverage ratio, proposing that banks should assign an additional 5% run-off factor to internet and mobile banking-enabled retail deposits. It also proposed tighter norms to value banks' high-quality liquid assets, among other changes. Currently, banks must maintain high-quality liquid assets worth 100% of their expected outflows for the next 30 days. The norms are proposed to come into effect from Apr. 1.

The tweaks proposed by the central bank are seen pushing up the computed amount of outflows against which banks have to maintain liquidity buffers. This, in turn, will lead to an increase in the requirement of high-quality liquid assets, which primarily include government securities.

Informist exclusively reported on Friday, citing a senior finance ministry official, that the new liquidity coverage ratio norms may be delayed owing to a pushback from the government and a change at the helm of the RBI with a new governor in Sanjay Malhotra. "It is very unlikely the norms will be implemented from the earlier set deadline," the official had told Informist.

Axis Bank's management Thursday said the lender will wait for the final liquidity coverage ratio norms before commenting on the impact. The management did, however, say the fall in margin in Oct-Dec was because of maintaining a higher liquidity coverage ratio. Net interest margin for the quarter was 4.06% for the domestic business and 3.93% for overall operations. While the former was unchanged from Jul-Sept, the overall net interest margin was down 6 basis points.

In December, Axis Bank's Group Executive and Head of Treasury, Markets and Wholesale Banking Products Neeraj Gambhir had said the proposed liquidity coverage ratio norms were a regulatory impounding on the system. "For a very long period of time, we have a core principle in the regulation that you have to treat every depositor as equal... which basically means... you have to maintain the same level of CRR (cash reserve ratio) and the same level of LCR, but what (the new) LCR (norm) has done is it has forced us to now discriminate," Gambhir had said at an event. "So, it is a discriminatory regulatory regime."  End

Reported by Priysmita Dutta

Written by Shubham Rana

Edited by Rajeev Pai

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